TravelCenters of America (TA) Drops on Lower Earnings

Shares of Westlake, Ohio-based TravelCenters of America LLC (TA) fell on Tuesday, on a marginally down day on Wall Street. TA's stock was down 14.97%, or $1.74 per share, to close at $9.88. Volume at 1,589,358 shares was about five times normal volume for the stock. TA reported that earnings for the second quarter of 2014, that ended on June 30, was down from the same period a year ago. Net income also came in below analysts expectations.

Founded in 2006, TravelCenters of America LLC operates and franchises 248 travel centers in 43 US states and in Canada.

173 stores operate as "TravelCenters of America" or "TA" brand names, and 75 operate under the "Petro" brand name. The centers provide diesel fuel and gasoline, truck repair and maintenance services, full service restaurants, quick serve restaurants, travel and convenience stores and various driver amenities. The company also operated 34 convenience stores with retail gas stations, primarily under the "Minit Mart" name. For 2013, the company had earnings of $29.6 million on revenues of $7.94 billion. The company employs 20,670 people and its stock trades on the New York Stock Exchange.

On Tuesday the company reported that it's second quarter net income was $13.63 million, or $0.36 per share, compared to $15.98 million, or $0.54 per share for the second quarter of 2013. The consensus estimate for net income by analysts was $0.40 per share. Revenue however exceeded the second quarter of 2013, coming in at $2.076 billion, compared to $2.02 billion a year earlier. Revenues also came in slightly below analysts expectations of $2.08 billion.

The decrease in net income for the second quarter of 2014 was attributed to an increased income tax provision as a result of the company having reversed most of its valuation allowance against its deferred tax assets in the fourth quarter of 2013. For 2013 the income tax provision was small, due primarily to the fact that TA was able to offset its income tax provision with deferred tax assets not previously recognized as a result of the company then having a full valuation allowance against its deferred tax assets.

Capital improvements to recently purchased travel centers require a period of time to produce stabilized financial results. The company estimates that the travel centers it acquires generally will reach stabilization in approximately the third year after acquisition, but actual results can vary widely due to factors beyond company control. The company acquired 31 travel centers and 31 gas/convenience stores between 2011and 2014 that generated gross revenues in excess of cost of goods sold and site level operating expenses.

"Our second quarter 2014 results included strong growth in key measures like EBITDAR and pre-tax income, and continued the growth of financial contributions from our recently acquired sites, including travel centers and convenience stores," Thomas M. O'Brien, TA's CEO reported. "Since the end of the second quarter, we closed the acquisitions of two additional travel center properties and entered agreements to acquire three travel centers and seven gasoline/convenience stores."